Question:

3 Some firms in Monaco have experienced external growth. Firms in Monaco pay high wages.
Workers in Monaco benefit from fiscal policy which contributes to high employment. Their
government does impose VAT on food, including fruit. Some economists have suggested that
instead of taxing fruit, governments should provide free fruit to consumers.
(a) Define external growth of firms. [2]
(b) Explain two reasons why low-skilled workers may be highly paid. [4]
(c) Analyse how fiscal policy can increase employment. [6]
(d) Discuss whether or not a government should provide free fruit to consumers. [8]

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